Estimate at Completion (EAC) answers a practical project-control question: if the project continues under a particular cost-performance assumption, what is the total cost likely to be when the work is finished? The arithmetic is not difficult. The judgment is choosing the formula that matches what you believe about the remaining work.<\/p>\n
EAC belongs to the larger logic of earned value management. Before calculating it, you need to understand the relationship among budget, planned value, earned value, actual cost, and performance indexes. The broader earned value management formulas<\/a> matter because an EAC result is only as meaningful as the assumptions behind the numbers.<\/p>\n The most common EAC calculations use four inputs:<\/p>\n BAC \u2014 Budget at Completion.<\/strong> The approved budget for the work being measured.<\/p>\n EV \u2014 Earned Value.<\/strong> The budgeted value of work actually completed.<\/p>\n AC \u2014 Actual Cost.<\/strong> What the completed work has actually cost.<\/p>\n CPI \u2014 Cost Performance Index<\/a>.<\/strong> Some forecasts also use the Schedule Performance Index, Use Suppose BAC is $1,000,000. The project has earned $400,000 of value while spending $500,000. CPI is therefore The calculation says the project is trending toward a $1.25 million total cost, or $250,000 above the original budget.<\/p>\n This method is often the cleanest forecast when the overrun is systemic: productivity is lower than expected, unit costs are consistently higher, rework is recurring, or the estimating assumptions were broadly optimistic.<\/p>\n Use Using the same project, AC is $500,000, BAC is $1,000,000, and EV is $400,000. The remaining budgeted work is $600,000. If you expect the remaining work to perform according to the original estimate:<\/p>\n That forecast is much lower than the CPI-based result because it treats the first $100,000 of unfavorable performance as a non-recurring event.<\/p>\n This assumption needs evidence. A one-time supplier penalty, an isolated prototype failure, or a completed piece of expensive rework may justify it. \u201cWe will do better from now on\u201d does not.<\/p>\n This form makes the assumption explicit: actual cost already spent cannot be changed, and the remaining budgeted work is adjusted by the current cost-performance index.<\/p>\n With AC = $500,000, BAC = $1,000,000, EV = $400,000, and CPI = 0.80:<\/p>\n In this simplified example it produces the same result as Some forecasting scenarios assume that poor schedule performance will continue to create cost pressure. In that case, a combined index may be used:<\/p>\n If CPI is 0.80 and SPI is 0.90, the denominator becomes 0.72. With the same remaining budgeted work of $600,000:<\/p>\n The higher forecast reflects a more pessimistic assumption. It says the remaining work is affected by both the cost inefficiency already observed and schedule conditions that may continue to drive cost.<\/p>\n Do not apply the combined formula automatically whenever SPI is below 1.00. The forecast should reflect the causal reality of the project. A schedule variance does not always translate into additional cost.<\/p>\n Formula-based forecasts are useful when performance history is a reasonable basis for predicting the rest of the project. They are weaker when the future work is materially different from the work already completed.<\/p>\n If the team has re-estimated the remaining scope from the ground up, use:<\/p>\n ETC is Estimate to Complete: the current forecast of what the remaining work will cost. This can be more defensible after a major scope change, supplier change, architecture redesign, recovery plan, or material shift in resource strategy.<\/p>\n Good forecasting therefore connects EAC with the quality of the estimate itself. The broader set of project estimation techniques<\/a> matters because a detailed ETC should be built from credible assumptions, quantities, rates, risks, and remaining work\u2014not simply chosen to make the final number look acceptable.<\/p>\n Once you have EAC, calculate Variance at Completion:<\/p>\n If BAC is $1,000,000 and EAC is $1,250,000:<\/p>\n A negative VAC indicates a forecast overrun. A positive VAC indicates a forecast underrun.<\/p>\n The number becomes useful when it changes a decision. A forecast overrun may require scope review, contingency use, supplier action, funding approval, or a different delivery approach. The project manager should not wait until the money is actually spent before escalating a trend that is already visible.<\/p>\n The To-Complete Performance Index (TCPI) does not predict the final cost. It shows the cost efficiency the remaining work would need in order to achieve a target.<\/p>\n If management still expects the project to meet BAC:<\/p>\n Using BAC = $1,000,000, EV = $400,000, and AC = $500,000:<\/p>\n The team has been performing at a CPI of 0.80 but would need a future efficiency of 1.20 to recover to the original budget. That gap should trigger a management discussion. The number may show that the original target is no longer realistic.<\/p>\n The PMP formula set<\/a> is easier to learn when each formula answers a management question rather than being treated as a symbol-memorization exercise.<\/p>\n For exam questions and real project work, the most important words are usually the assumptions:<\/p>\n \u201cCurrent cost performance is expected to continue.\u201d<\/strong> Think CPI-based forecast.<\/p>\n \u201cThe variance was atypical and the remaining work will follow the original plan.\u201d<\/strong> Think actual cost plus original remaining budget.<\/p>\n \u201cBoth cost and schedule performance are expected to influence the remaining work.\u201d<\/strong> Consider the combined CPI\/SPI forecast.<\/p>\n \u201cThe remaining work has been re-estimated.\u201d<\/strong> Use actual cost plus a new bottom-up ETC.<\/p>\n This scenario-based reasoning is more useful for the current PMP certification<\/a> than memorizing formulas without knowing when their assumptions apply. PMI\u2019s current exam places substantial emphasis on project outcomes, value, business impact, and real-world decision making, so calculations should be connected to the management choice they inform.<\/p>\n A strong project status report should not present one EAC number with no context. State which method was used, why it was chosen, what assumptions matter, and which risks could move the forecast.<\/p>\n For example: \u201cCurrent EAC is $1.25 million based on CPI performance of 0.80. The forecast assumes the productivity trend continues through remaining software integration. If the planned automation reduces rework after the next release, the bottom-up ETC will be refreshed.\u201d<\/p>\n That sentence gives management something to evaluate. It is stronger than a spreadsheet that produces a precise number from an assumption nobody discussed.<\/p>\n Practice EAC inside broader cost-control scenarios rather than in isolation. Use PMP financial planning and cost-control scenarios<\/a> and performance-measurement scenarios<\/a> to explain why one forecast is more appropriate than another.<\/p>\n EAC is not a single formula. It is a family of forecasts built around different assumptions about future performance. Identify the reason for the variance, decide whether it is expected to continue, determine whether schedule pressure affects cost, and use a bottom-up estimate when the remaining plan has materially changed. The arithmetic then becomes the easy part.<\/p>\n","protected":false},"excerpt":{"rendered":" Estimate at Completion (EAC) answers a practical project-control question: if the project continues under a particular cost-performance assumption, what is the total cost likely to be when the work is finished? The arithmetic is not difficult. The judgment is choosing the formula that matches what you believe about the remaining work. EAC belongs to the larger logic of earned value management. Before calculating it, you need to understand the relationship among budget, planned value, earned value, actual cost, and performance indexes. The broader earned value management formulas matter because an…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[685],"tags":[],"class_list":["post-7466","post","type-post","status-publish","format-standard","hentry","category-project-management"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\tStart with the four values you actually need<\/h3>\n
CPI = EV \/ AC<\/code>. A CPI below 1.00 indicates that the project is receiving less budgeted value than the money it is spending.<\/p>\nSPI = EV \/ PV<\/code>, when the analyst believes schedule pressure will continue to affect cost. The important point is that the indexes are not decorations. They encode the assumption you are carrying into the forecast.<\/p>\nMethod 1: EAC = BAC \/ CPI when current cost performance will continue<\/h3>\n
EAC = BAC \/ CPI<\/code> when you believe the cost efficiency experienced so far is reasonably representative of the remaining work.<\/p>\n400,000 \/ 500,000 = 0.80<\/code>. If that 0.80 cost efficiency continues, the forecast becomes:<\/p>\nEAC = 1,000,000 \/ 0.80 = 1,250,000<\/code><\/p>\nMethod 2: EAC = AC + (BAC – EV) when the past variance was exceptional<\/h3>\n
EAC = AC + (BAC - EV)<\/code> when the cost variance to date is real but you have a credible reason to believe it will not continue.<\/p>\nEAC = 500,000 + (1,000,000 - 400,000) = 1,100,000<\/code><\/p>\nMethod 3: EAC = AC + (BAC – EV) \/ CPI for remaining work affected by cost efficiency<\/h3>\n
EAC = AC + (BAC - EV) \/ CPI<\/code><\/p>\nEAC = 500,000 + 600,000 \/ 0.80 = 1,250,000<\/code><\/p>\nBAC \/ CPI<\/code>. The value of writing the expanded form is that the logic is easier to see: sunk actual cost plus a performance-adjusted estimate for the remaining work.<\/p>\nMethod 4: EAC = AC + (BAC – EV) \/ (CPI \u00d7 SPI) when cost and schedule pressure both matter<\/h3>\n
EAC = AC + (BAC - EV) \/ (CPI \u00d7 SPI)<\/code><\/p>\nEAC = 500,000 + 600,000 \/ 0.72 \u2248 1,333,333<\/code><\/p>\nA bottom-up EAC is often better when the remaining plan has changed<\/h3>\n
EAC = AC + bottom-up ETC<\/code><\/p>\nVariance at Completion tells you how far the forecast moved from the budget<\/h3>\n
VAC = BAC - EAC<\/code><\/p>\nVAC = 1,000,000 - 1,250,000 = -250,000<\/code><\/p>\nTCPI asks a different question: what efficiency is now required?<\/h3>\n
TCPI = (BAC - EV) \/ (BAC - AC)<\/code><\/p>\nTCPI = 600,000 \/ 500,000 = 1.20<\/code><\/p>\nChoose the formula from the scenario, not from memory<\/h3>\n
EAC should be a forecast with an explanation<\/h3>\n